Energy cost reduction: a UK procurement-led playbook

What is actually on a UK business energy bill

Ofgem's Best Practice Guide on Non-Domestic Billing Transparency (published November 2024, developed with suppliers and consumer groups) sets out the categories every non-domestic bill should make legible. Industry references such as Purely Energy's public charges catalogue — which tracks 90+ live electricity charges — put non-commodity costs at approximately 50–65% of a typical UK commercial electricity bill.

A useful rough anatomy of a UK electricity bill — and the reason those energy-cost shares in EU industry can move so sharply between businesses: ^[6]

• Wholesale commodity: the market cost of the electricity itself.
• Network charges (DUoS, TNUoS, BSUoS): the cost of moving electricity through distribution and transmission networks.
• Policy costs: Renewables Obligation, Contracts for Difference, Capacity Market, FiT, Climate Change Levy and similar.
• Supplier margin and operating costs: the retailer's own overhead, working capital and margin.
• Metering and settlement: smaller line items, but consolidatable.

Where procurement actually shifts the number

1. Contract structure and hedging

Fixed, flexible, basket and pass-through structures each price commodity risk differently. The right structure depends on your consumption profile, risk appetite and cash-flow sensitivity — not on which product a broker earns most from. For most mid-market UK businesses a flexible or basket product with clearly disclosed broker commission is the honest baseline.

2. Non-commodity charges and the TCR

Ofgem's Targeted Charging Review changed the economics of behind-the-meter generation and triad avoidance. The core decision is here: TCR Decision and Impact Assessment (December 2019), with the follow-on transmission demand residual changes in the CMP343 decision (March 2022). For businesses that historically valued "triad avoidance" or embedded benefits, the payback of demand shifting has materially changed — old models need re-running.

3. Broker commission transparency

Ofgem's billing transparency guide (linked above) makes clear that non-domestic suppliers and brokers should disclose uplift/commission. If your last renewal did not show the broker fee as a separate line, ask for a Third Party Charges Statement at the next renewal. Uplifts are a real, negotiable cost.

4. Demand-side management

Load shifting, half-hour peak avoidance where still economic, participation in National Grid ESO's Demand Flexibility Service, and simple building-controls tuning are the operational levers. National Grid ESO publishes its Demand Flexibility Service rules and payments annually — worth reading before commissioning a demand response project.

5. On-site generation and PPAs

On-site solar, CHP and behind-the-meter storage change your bill's shape (self- consumption erodes both commodity and network charge exposure). Corporate Power Purchase Agreements shift the price risk without the balance-sheet impact of on-site build. Both are long-dated commitments and belong in a treasury conversation, not a category one.

Where to start

• Get a clean 24-month bill dataset. Half-hourly (HH) data if metered that way. Without it, "savings" claims are guesses.
• Ask for a Third Party Charges Statement from your current broker before renewing.
• Refresh any TCR-era assumptions. Triad-avoidance investments made pre-2019 usually need re-modelling.
• Sequence: broker commission and structure first (near term), demand-side second (medium term), on-site generation last (capex).

See our broader cost reduction consulting approach for how energy usually sits alongside the other indirect categories. The UK Government's Business Energy Statistical Summary shows the same pattern across sectors and consumer sizes: energy price increases have materially raised the share of energy in operating costs for many industries, accelerating investment in efficiency and hedging. ^[7]